Truthful Equilibria in Generalized Common Agency Models

TL;DR

This paper establishes general conditions for the existence, simplicity, and efficiency of truthful equilibria in common agency models, with applications to market and lobbying scenarios involving externalities.

Contribution

It generalizes conditions for truthful equilibria, enabling their use in new economic models with externalities and demonstrating their efficiency in complex settings.

Findings

Truthful equilibria are plausible and easy to compute under certain conditions.

Externalities do not necessarily hinder the efficiency of truthful equilibria.

Applications include a market game and a lobbying model with externalities.

Abstract

In this paper I discuss truthful equilibria in common agency models. Specifically, I provide general conditions under which truthful equilibria are plausible, easy to calculate and efficient. These conditions generalize similar results in the literature and allow the use of truthful equilibria in novel economic applications. Moreover, I provide two such applications. The first application is a market game in which multiple sellers sell a uniform good to a single buyer. The second application is a lobbying model in which there are externalities in contributions between lobbies. This last example indicates that externalities between principals do not necessarily prevent efficient equilibria. In this regard, this paper provides a set of conditions, under which, truthful equilibria in common agency models with externalities are efficient.